A key activity of many trade and professional associations is the conduct and publication of surveys of statistical and other information regarding the association's industry or profession. For instance, many associations survey members and other industry participants regarding salaries, sales figures, inventory levels and other matters. The information gleaned from such surveys often is valuable to professionals or companies within the particular industry, providing a glimpse of recent trends.
Of course, conducting and publishing surveys of industry data carries significant antitrust risk, and such activity should only be conducted with great care. Even if the survey is not of prices charged, but rather of information regarding salaries, cost of materials, credit terms, and other such items, there may be significant antitrust risk in collecting and disseminating such data.(1) This article will address the antitrust concerns that can arise and provide suggestions for minimizing antitrust risk in connection with such surveys.
Exchange of Price Information
In the Container Corporation case, a group of competing corrugated container manufacturers engaged in a reciprocal exchange of price information that the Court held to be concerted action that resulted in price stabilization and, hence, a violation of the Sherman Act. The price information exchange was accomplished informally -- a company would ask a competitor for information regarding the most recent price charged or quoted at any time, and the competitor generally would provide the requested information. There was no requirement that competitors participate in the exchange, but evidence demonstrated that approximately 90 percent of the corrugated container market was represented within the price-exchange group. The Court determined that even without evidence of an express agreement among competitors to maintain prices at a particular level, the program and the resultant effects of the program (i.e., price stabilization) were enough for the Court to infer such an illegal agreement.
Courts also have been wary of association information exchange programs involving the reporting of information regarding customers' creditworthiness. While credit-reporting programs are not uncommon to trade associations, they often have been the focus of scrutiny by antitrust enforcement agencies, antitrust plaintiffs, and the courts for their potential to facilitate illegal collusion among competitors to boycott certain customers that are deemed bad credit risks1 and/or to agree to uniform credit terms.2 But despite the scrutiny, the U.S. Supreme Court and federal antitrust enforcement agencies have decided in numerous situations that particular
association credit-reporting programs were not in violation of the Sherman Act.3
In a more recent example of an antitrust-sensitive information exchange that was not favored by the courts, the U.S. Court of Appeals for the Second Circuit decision (Todd v. Exxon, 275 F.3d 191 (2001)) highlights the continuing concerns connected with the collection and exchange of competitively sensitive information. At issue in Todd were salary surveys conducted by some 14 major oil companies. The plaintiffs in this class action case alleged that the participating companies used the information gained from these surveys to keep salaries among certain nonunion employees artificially low. A lower court had dismissed the lawsuit, on the basis that the plaintiffs did not plead sufficient information to merit moving forward with the case. The decision reinstated the plaintiffs' case, holding that the lower court was wrong in granting the oil companies' motion to dismiss.
According to the Second Circuit opinion, the surveys were conducted regularly and were discussed frequently at meetings of human resources professionals and other staff of the participating companies. The information was not available publicly and was not available to employees who held the positions that were the subject of the survey. The surveys included information about salaries paid in the past and present, as well as information about what the companies expected to pay in the future.
The court held that the case should continue. The key reasons the court gave for siding with the plaintiffs were: (1) much of the data collected and disseminated concerned current and future salaries; (2) the data was broken down in certain ways so that it was an aggregate of as few as three companies; (3) the information was not publicly available and was not disseminated to employees; and (4) the information was discussed among participating companies at meetings. The court also rejected an argument from the defendants that the exchange of salary information is not likely to have anticompetitive effects. Rather, the court viewed the defendant oil companies as purchasers of employment services and determined that the companies may have market power as such purchasers and thus may have the ability to artificially depress salaries and have an anticompetitive effect on the market for oil company employees.
Staying Out of Trouble
The existing case law makes clear that in order to minimize antitrust risk, an association that collects and disseminates competitively sensitive information (whether price, credit terms, salary information, or any similar type of information) should do so in a manner that does not facilitate agreement among members to fix prices, boycott customers, or otherwise act collectively with anticompetitive effects.4 Note that the requisite "agreement" among competitors does not need to be express and may, in fact, be inferred by a court or antitrust enforcement agency from a course of conduct.5
Despite the significant legal concerns connected with the conduct of industry surveys of sensitive information, the value of such surveys is unquestionable. Associations and their members often view such surveys as among the most valuable benefits an association can offer. In order to continue offering such a key member benefit while minimizing legal risks, there are steps that an association can take:
1. Have a third party manage the process: In a joint statement released by the U.S. Department of Justice Antitrust Division ("Antitrust Division") and the Federal Trade Commission ("FTC") regarding antitrust in health care, the use of a "trade association" to serve as a third party to collect and disseminate survey information is specifically approved. Still, associations must take care to ensure that those handling the raw data from the survey are association staffers and not volunteers who work for members or other participants in the survey. 6 For particularly sensitive industries, having some other entity (such as, an accounting firm) handle the data collection and dissemination may be preferable.
2. Make the data available: It generally is advisable for an association to make its survey results and other industry research available to both members and nonmembers.
3. Stick to the past: The Antitrust Division and FTC recommend that to qualify for an "antitrust safety zone," wage and price surveys should only ask about wages paid or prices charged at least three months prior to the date survey participants complete the survey. Asking about current prices charged or wages paid will be viewed with a scrutinizing eye by antitrust regulators and would-be plaintiffs, and surveys of future prices or future compensation are very likely to be considered anticompetitive.
4. Aggregate data only: Having at least five different competitors respond to a survey of wage or price-related information is recommended by the FTC and Antitrust Division. Further, the agencies recommend that any information disseminated is sufficiently aggregated such that it would not allow recipients to identify the prices charged or compensation paid by any particular company. Specifically, no one participant's information should account for more than 25 percent of any item reported.
5. Avoid unregulated discussions of the results: Often, the problem with salary and price surveys is not the surveys themselves, but what competitors do with the information they receive. Thus, it is imperative for associations to take the initiative to discourage improper discussion of the survey results at association meetings as well as on association-sponsored chat rooms or listservers.
6. Make participation voluntary: Do not require members to participate in surveys and do not require that members' books be audited.
For more information, contact the author at 202/344-4000, or Mr. Constantine at firstname.lastname@example.org.
1 See, e.g., U.S. v. First National Pictures, 282 U.S. 44 (1930). Court determined that a film board credit-reporting program that included an agreement not to deal with companies that had questionable credit histories violated the Sherman Antitrust Act (15 U.S.C. § 1).
2 See, e.g., Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643 (1980).
3 See, e.g., Cement Manufacturers Protective Ass'n v. U.S., 268 U.S. 588 (1925); U.S. Department of Justice Business Review Letters 94-3, 75-12; and Federal Trade Commission Advisory Opinion No. 361 (1969). In each of these instances, a trade association collected credit information on common customers association members and disseminated such information to the association members, but there existed no evidence of collusive group boycotts or setting of uniform credit terms in those situations.
4 Price-fixing is, of course, viewed as a per se illegal activity under the Sherman Act -- where evidence exists of an agreement to fix prices, courts need not inquire as to whether the agreement resulted in anticompetitive effects. Some, but not all, group boycotts are viewed as per se illegal.
5 Eastern Sales Retail Lumber Dealers Ass'n v. U.S., 234 U.S. 600 (1914).
6 See U.S. Department of Justice and Federal Trade Commission Statements of Enforcement Policy and Analytical Principles Relating to Health Care and Antitrust (1993). Officials from the FTC have stated that the principles, while nominally focused on the health care industry, are broadly applicable to other industries